Everything you need to know about the Emissions Trading System (ETS)

ETS stands for Emissions Trading System. It is the European trading system designed to control carbon emissions in industry, with the goal of reducing them to zero by 2057.

Mandatory Market

Through this system, major polluters are required to surrender emission allowances to offset their emissions. Emission allowances can be viewed as a type of permit granted by the government. They give companies the right to emit greenhouse gases. One emission allowance represents 1,000 kg of carbon. Companies are receiving fewer and fewer of these allowances for free and must therefore purchase more to cover their emissions. The idea behind this is that companies will become more sustainable to save on the costs of emission allowances. The costs of emission allowances have also risen significantly over the years, making corporate social responsibility an attractive option.

The emissions trading system essentially gives companies the choice between paying a high price for emitting carbon or investing in sustainability. One way to do this is by entering the voluntary market.

Voluntary Market

In addition to this more or less mandatory trading market, a voluntary market has also emerged for companies that want to become more sustainable on their own initiative. Carbon credits are sold on this market. These credits are issued by certified climate projects around the world. This is an alternative way to offset carbon emissions. A carbon credit represents a measurable and verifiable reduction in carbon in the atmosphere and - just like in the ETS - is equivalent to 1,000 kg of carbon.

Companies are required to keep increasingly detailed records regarding the offsetting of their emissions. This makes voluntary investment in carbon credits an attractive option.